Friday, May 30, 2008

Two recent profiles

I still vividly remember, during my employment interviews at Frank Lynn & Associates in Chicago, when  John Henderson observed that I "was odd" because I downplayed my experiences while most interviewees overplayed their experiences. My recollection of his comment was something to the effect of "What's wrong with you?" After thinking for a second, I said something like "I'm from the Midwest. It's not cool to toot your own horn." He informed me that that was a rather odd strategy - particularly for a consultant. Frank Lynn & Associates hired me anyway and they were (mostly) very happy with their decision. (My tendency to be deadline driven freaked out a few people, initially, until they realized I always came through in the end and consistently exceeded clients' expectations.) 

Why share that story? Well, I wanted to share two recent profiles of me posted on the Internet, but somehow felt the need point out that I'm still struggling with the Midwestern notion of not bringing attention to myself. Oh well. I have a friggin Blog, for goodness sakes! So, John, I am getting better at promoting "Brand Me" - but I still feel weird about it. 

So, here we go. I have two new profiles of me that have popped up on the Internet! They're both pretty cool - if I do say so myself:-) 

Sunday, May 25, 2008

Achtung, Achtung: BMW, was machen sie?

I love BMWs. They drive great, they're solid and, quite honestly, I think they're worth the price. It really is the "Ultimate Driving Machine." 

But what's really been driving me crazy for the past 2+ years is the lack of diesel BMWs in America. Ironically, BMW sells far more diesel-powered that regular gasoline automobiles, even when you include American sales. The reason BMW has not yet introduced diesel models in America is our strict emission regulations - particularly in California. But BMW finally has a solution: BluePerformance. They're planning on launching diesel versions of 335d and X5 in the Fall of 2008. 

Besides the delay - I assume due to engineering the new BluePerformance technology into the vehicles - what's making me a little nuts is that BMW is missing a HUGE opportunity in the United States by only introducing these two, very powerful vehicles. Yes, BMW has gotten kudos for their reduction in CO2 emissions and having fairly fuel-efficient cars. But their obsessive belief that BMW-buying Americans only care about speed and power is clouding their vision. Every customer is NOT obsessed with having the fastest or most powerful car. Some of us actually like having a car that's fast enough, powerful enough, but really incredibly engineered and exhibits supreme handling as well. Yes, it's the "ultimate driving machine," but that doesn't need to be solely about the number of seconds it takes to go from 0 to 60. 

Here's my point. I read the most incredible article recently comparing a Toyota Prius and a BMW 520d in England. (The 520d is a 4-cylinder diesel not sold in North America.) The amazing finding? The BMW 520d had better gas milage than the Prius!!!  

Also, the BMW118d  recently won the "World Green Car of the Year" at the New York auto show, based on it's super low emissions and 47+ miles to the gallon efficiency. But we can't buy the 118d in America because, apparently, BMW managers are worried that we're too speed and power obsessed to buy it. (Also, it has a hatchback, which BMW hasn't figured out is now a good thing in America, in contrast to their experiences with the 318 years ago. That's surprising since BMW is selling a ton of Mini Coopers in the US - so they certainly have first hand experience suggesting that hatchbacks are not the kiss of death anymore in the premium segment.) 

So Americans are going crazy with rising gas prices, finally buying more cars than trucks and preferring small cars with excellent gas milage over big, heavy traditional boat-like cars. But no car company is serving BMW's traditional upscale market segment - yet. So why delay? BMW has the technology and a range of models NOW that address Americans' new found desire for efficiency. There are a whole bunch of us who can afford a BMW and would like a nice car that gets great milage. (I'm sorry, the Prius is awesome technologically, but I'm just not going to buy a car that looks and feels like a college engineering experiment.) 

BMW has a unique window of opportunity to really increase their market share in America and simultaneously do the right thing - help us conserve energy. They can still sell their high powered, super fast cars as well (such as the 1-series with the 3-series 6-cylinder engine designed for America), but give us a choice. If nothing else, why not bring a bunch of the diesel powered cars to America and invite your customers to test drive them on an American city tour? How cool would that be? Plus, BMW would get first-hand feedback from current owners. Who knows, they might surprise BMW - and BMW might surprise BMW owners. And how great for the BMW brand to be known as the ultimate driving machine on all dimensions: awesome to drive, superior engineering, efficient and green as well? That value proposition seems perfect for a large portion of BMW's target market in America.  

Please BMW, I love your cars. Is it too much to ask to let me buy one that I can enjoy filling up as much as I enjoy driving?  

Prediction: American Airlines's Chaos-Causing Baggage Fee

Wow, just when I thought the "major" airlines couldn't screw up the business anymore, American Airlines has proved me wrong by instituting a $15 per piece baggage fee.  This is an idea straight out of an Excel spreadsheet designed by a newly-minted MBA with no concept of value propositions or game theory. 

I can totally see how the baggage fee looks brilliant at first blush. The baggage fee is not shown on the ticketing websites and, therefore, presents an opportunity to add an additional fee on top of the airfare, which is salient when people choose a carrier/flight. Basically, American Airlines (AA) can price at perceived parity with their competitors, but then grab an extra $15-30 of revenue when the customer checks in. If no other carrier follows suit, AA can effectively charge $15-30 more per comparable flight without losing many customers by decoupling the total fee from the salient time-of-purchase posted price. 

So, what's wrong with this approach? Well, three things. First, this kind of shenanigan is perfectly transparent and screams of "gotcha capitalism" - which really honks people off. My favorite (or least favorite, to be consistent) version of this is hidden hotel fees. The most exorbitant are city/state taxes/fees - particularly in New York City, Chicago and San Francisco - and are not included in the price quote when you make a reservation. I blame silly politicians for this bait and switch concept of sticking it to the tourists and business travelers - which I've got to believe has a long term negative impact on tourism (i.e., "I hate getting a hotel in New York because the actual price is oftentimes 50% more than the quoted price").  But the really maddening fees are the "safe fee" and the "gym/spa fees" which previously were included in the price of a room. Now hotels do this really slimy thing where they don't include the fees in the original price quote/reservation, but charge you for various sundries when you check out. If you say nothing, you get screwed. But even if you try fighting these hidden gotcha fees, it's hard to win the argument. Assuming no other airlines are silly enough to institute a baggage fee, people's attitudes toward the AA brand will decrease and AA's ability to charge pricing premiums or realize higher choice rates based on their brand name will decrease over time. I'm guessing that notion isn't in the MBA's awesome baggage surcharge spreadsheet. AA might lose a lot more than it gains by instituting the baggage fee.  

The second reason this is a bone-headed move is that if you look at the outcomes from a competitive standpoint, none of the three most likely competitive reactions are net cash flow positive over the long term. The competitive reaction AA is most likely hoping for is that no other carrier implements the baggage fee and, thus, AA charges a net higher fee for all its flights than competitors for comparable routes. But that doesn't take into account the damage to the AA brand - which will likely increase pricing sensitivity toward the AA brand and also lower consumers' a priori preference for AA, meaning they'll sell less tickets when they go head-to-head against other carriers. The next most desired outcome for AA is probably that all the major carriers match AA's move and, thus, every carrier can charge more for their tickets than they do now. But so what? By going first, AA hurts its brand and risks that others won't follow. Even if we assume that the impact on AA's brand is minimal and other carriers follow, AA has just created the same prisoner's dilemma they created with their frequent flier program: if every carrier implements the same policy, AA has no advantage over the others. But what I hope happens, and is certainly possible, is that Southwest or JetBlue will start running ads that focus on "our price includes everything, including your bags."  Or even better, "Why pay extra for your bags on AA if we're more likely to get them to where your going for free?" (I really like that one, but don't have time to see if Southwest or JetBlue do a better job at getting bags to the same place as passengers.) The bottom line of this will be that AA will need to rescind their baggage fee - which will have a net cash flow negative impact by (a) hurting the AA brand equity, (b) incurring significant set-up and tear down costs for the program and (c) enhance the brand image of competitive carriers. None of these likely outcomes is a net cash flow positive for AA. 

OK, the worst part of AA's baggage fee policy will be to make air travel even more unpleasant than it already is - which is stunning!! First, I'm getting sick to my stomach just imagining all of the "amateur" travelers holding up the check-in lines at airports arguing about the baggage fee, explaining they don't have the money on them to pay for the fee, and generally spreading bad Karma everywhere. That should really help ticket agent turnover - assuming you're trying to make it higher!! Second, as if making the seats smaller as Americans keep getting bigger wasn't awful enough  (another bone-headed Excel spreadsheet decision attempting to maximize capacity), AA has just significantly increased the insanity of passengers taking everything they own into the cabin. Every flight I can remember over the past five years that was 80% full included flight attendants racing around like they were playing some insane whack-a-mole game trying to shove baggage into overhead compartments, which oftentimes ends by tagging a few gigantic bags for jetway luggage handling before the plane could take off. In fact, I almost always check my luggage and just take my laptop briefcase with me anymore because I just don't want to deal with all that chaos on the plane. 

So what's the likely impact of AA's new baggage fee inside the cabin? More people carrying more crap onto the jet that clearly won't fit. More aggravation for travelers. More aggravation for flight attendants and pilots. And more delays. When AA loses baggage that they've now charged extra for (and they will, because there's always some chance baggage gets lost/incorrectly routed), they'll be hell to pay by travelers who paid $15 to not have their bag show up at their destination. 

And heaven forbid the other airlines follow suit with a baggage fee - we can all look forward to even more unpleasant experiences flying in America. I, for one, wish we had better trains in America because I just can't stand flying anymore - and it's only going to get worse until some airline wakes up and figures out that there is a HUGE opportunity in making flying a pleasant experience again. (And, please, make the seats bigger too.) 

Thursday, May 15, 2008

Why Obama is the Candidate Most Likely to Create Change in Washington

A few years ago my colleagues and I studied how organizations create a greater market focus. One of our most striking findings was that change begins with a new leader who is focused on improving organizational processes – rather than focusing on a discrete monetary or market-share goals. Successful leaders focus on imbuing their organizations with six key values: trust, openness, keeping promises, respect/empathy/perspective taking, collaboration, and the market as the raison raison d'ĂȘtre

Leaders forced organization members to interact and create a shared understanding of the market by sending cross-functional teams into the market (e.g., a purchasing agent, engineer and shop floor worker would visit customers and distributors together). By focusing on common experiences and a shared understanding of the market, organizations became more market-focused and, thus, more successful than before. Perhaps the best-known example of such a transformation occurred at Harley-Davidson Motor Company, which narrowly escaped bankruptcy in the 1980s to become one of the most successful American manufacturers in the 1990s and continues to exceed expectations today.

There are striking parallels between our research and the two remaining Democratic candidates. Hillary Clinton’s style is consistent with the notion of a mythical, all-knowing leader who provides all the answers for fixing an organization – a style we found unlikely to create positive organizational change. Hillary Clinton and the media consistently comment that she has more detailed policy positions and she vociferously defends those policy positions as unambiguously better than Senator Obama’s positions. Ironically, there appears to be an implied assumption that President Hillary Clinton would implement better policies and could do so because of the harsh lessons learned from her health care efforts in the early 1990s. Yet, she continues to insist that she somehow has greater insight and better answers than anyone else. This begs the question if she has, in fact, learned from her earlier failures.

Conversely, Barack Obama’s style is consistent with successful change leaders: someone who gets people to focus on common issues and who realizes that the process of agreeing on a shared understanding of a situation will lead to greater cooperation, trust and success. Whereas Senator Clinton focuses on explaining that her policies are better, Senator Obama is focused on fixing the process of developing and implementing solutions. Although some may see this as a weakness for Senator Obama, our research suggests that his approach is more likely to be successful at creating change because it allows other people to participate and take ownership in the change process.

Differences between the candidates’ styles appear fairly stable and, thus, allow voters to project which candidate is more likely to actually move America in a positive direction. Senator Clinton is well known for her ability to “fight.” Whether comparing herself to the fictional character Rocky in Philadelphia or committing to “fight” for voters in Ohio, the common theme is her tenacity in fighting for what she believes in. Unfortunately, in spite of her tremendous intellect and grasp of policy details, it’s absurd to assume she has all the answers. Furthermore, which Americans would President Hillary Clinton fight with, exactly? The role of President is to lead everyone: Republicans, Democrats, Greens, Libertarians, and independents. Historically speaking, it’s difficult to comprehend how a President who is committed to fighting with members of Congress can accomplish much at all. Sure, with majorities in the House and Senate, a President can force through controversial legislation, but that won’t change the tone in Washington. Additionally, as President Bill Clinton discovered in 1994, it can have disastrous effects in the next election cycle.

In contrast, Barack Obama has a long history of working with competing interests to find acceptable compromises that everyone can agree on. Biographical sketches of Senator Obama have included interviews with colleagues who joke that Senator Obama’s approach of hearing everyone’s opinion before working on a common solution drove them a little crazy – but it worked. Although on a much larger scale, that community organizing approach – premised on respecting the inherent dignity of every person and listening to everyone’s concerns – bodes well for an effective commander in chief. Senator Obama’s personal history as the son of an African father and a white, American mother who later married an Indonesian man appears to have nurtured his ability to empathize and understand a wide array of viewpoints, which has become extremely honed throughout his life. Senator Obama’s speech on race relations was an astounding example of his ability to empathize – and truly understand – the perspectives of both white and black Americans.

Senator Obama shares three other characteristics with successful change leaders: honesty, authenticity, and a willingness to admit he was wrong. Although empathy, honesty, authenticity and a willingness to admit one is wrong are not all that’s needed for a successful leader – but it’s certainly the first step in being able to work openly and honestly with a wide range of people to create shared understandings and work on effective solutions.

The characteristics of successful leaders in business transformations appear to be the same ones this country could use in moving us forward. When choosing a company president to transform a company, shareholders are better off choosing a leader rather than a fighter. That’s something the Democratic Party and America should consider as we choose a President for all of us.